Economic Recovery Not A Silver Bullet For SMB Growth, C2FO Finds

The latest report by alternative lender C2FO finds that economic recovery doesn’t necessarily negate every problem for small business (SMB) owners.

The company recently published its Working Capital Outlook Survey, analyzing more than 2,600 small businesses across the U.S., the U.K., Germany, Italy, France, China and India. Analysts pointed to an “uncertainty paradox,” driven by rising uncertainty among small business owners despite economic recovery and improved access to financing.

Two-thirds of SMBs say their need for liquidity has increased since 2016, with India and China showing the highest demand for financing. And while the economy is showing signs of growth across these jurisdictions, C2FO noted the demand for financing may actually be outpacing economic recovery.

Nearly a third of small businesses (31 percent) said high interest rates, not access, was their largest challenge when it came to accessing financing, while a fifth of SMBs said they still find it difficult to obtain a traditional bank loan. Political uncertainty and a lack of confidence in customer relationships landed as the top two hurdles small businesses said they face when trying to grow.

In addition to this “uncertainty paradox,” C2FO also found other contradictory trends. For instance, the company said in its announcement, late payments and restrictive payment terms are on the rise among small businesses, despite legislative efforts in the EU to ensure faster B2B payments to small suppliers. A quarter of small businesses surveyed said their customers are forcing longer invoice payment terms on them, researchers said.

C2FO concluded there’s a “significant opportunity” for larger corporates to support their small supplier base via affordable financing.

Small businesses are facing other challenges. Separate research released this month found that while jobs performance surpassed expectations in the U.S. in January, SMBs struggled to benefit from that trend, though analysts noted a dip in hiring growth among small businesses is common in the beginning of the new year.

The marketplace lender raised $40 million in venture capital in 2015 from Temasek Holdings and other backers.